Shentel reports third quarter 2017 results

Posted 6 November 2017 5:08 PM by Shentel

For the quarter ending on September 30, 2017, Shenandoah Telecommunications Company reported net income of $3.5 million, compared to a net loss of $7.6 million in the third quarter of 2016, representing an improvement of $11.1 million, or 146.5%.

This improvement primarily relates to improved results in the Cable and Wireline segments, the reductions in the integration and acquisition expenses related to the transformation of nTelos to the Sprint Affiliate model, partially offset by higher interest on the increased balance of outstanding debt as a result of the nTelos acquisition. The Company is also excited to report that the integration of nTelos' operations, the transition of its customers, and the upgrade of the network have been completed ahead of schedule.

Total revenues were $151.8 million, a decrease of 3.2% compared to $156.8 million for the 2016 third quarter. Wireless service revenues decreased 3.2% as a result of lower average revenue per subscriber. Of the former nTelos customers, approximately 65% of prepaid and 75% of postpaid migrated to the Sprint platform. Cable segment revenues increased 9.2% due to an increase in High Speed Data and voice Revenue Generating Units (RGUs), video price increases to offset increases in programming costs, and new and existing customers selecting higher-speed data packages. Wireline segment revenues increased 6.0% due to increases in fiber revenue.

Total operating expenses were $142.3 million in the third quarter of 2017 compared to $160.8 million in the prior year period, a decrease of $18.5 million or 11.5%. Operating expenses in the third quarter of 2017 included $2.9 million of integration and acquisition costs associated with the nTelos acquisition and the exchange transaction with Sprint, compared to $20.2 million in the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) decreased 9.3% to $66.9 million in the third quarter of 2017 from $73.7 million in the third quarter of 2016. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee) decreased 9.8% to $57.9 million from $64.2 million.

President and CEO Christopher E. French commented, “We delivered solid results in the third quarter of 2017 with the most notable achievement being our completion of the transformation of nTelos into the Sprint Affiliate model, which we accomplished a full quarter ahead of schedule and under budget. The transformation included upgrading the nTelos wireless network to a state-of-the art 4G LTE network, which will allows us to capitalize on the fourth quarter selling season. We have launched the biggest advertising campaign in our Company’s history to highlight our enhanced network and drive new customer growth.”

Wireless Segment

Third quarter wireless service revenues decreased $3.6 million or 3.2%, primarily related to a reduction in average revenue per customer as a higher percentage of our postpaid customer base moved from higher revenue subsidized phone price plans to lower revenue price plans associated with leased and installment sale phones.

Shentel served 727,954 wireless postpaid customers at September 30, 2017, up 1.3% over September 30, 2016. Third quarter postpaid churn was 2.19% for the total company and 1.66% in the Legacy area. Excluding the impact of churn caused by customer migrations, the total Company churn was 1.85%. The Company had a net loss of 4,710 postpaid customers in the quarter with the Legacy area adding 2,878. Excluding the customer loss due to nTelos customer migration, the Company had net adds of approximately 5,700. As of September 30, 2017, tablets and data devices were 7.6% of the postpaid base reflecting a net loss of 1,388 in the quarter.

Shentel served 224,609 prepaid wireless customers at September 30, 2017, a decrease of 20 thousand compared to the third quarter of last year. The decrease includes the 24 thousand prepaid customer reduction in the fourth quarter 2016 due to Sprint decreasing the length of time an inactive customer would be carried in the customer counts. Total third quarter prepaid churn was 5.25% and 5.04% in the Legacy area. The Company had net additions of 2,571 prepaid customers in the third quarter of 2017, with the Legacy area net additions of 1,942.

As previously reported, the prepaid migration was completed in late December 2016, and the outsourced prepaid billing arrangement was terminated. Shentel completed the migration of the postpaid nTelos customers and the upgrade of the network September 30, 2017.

Third quarter 2017 Adjusted OIBDA in the Wireless segment was $54.2 million, a decrease of 13.3% from the third quarter of 2016. Continuing OIBDA in the Wireless segment was $45.2 million, down 14.7% from the third quarter of 2016.

Mr. French continued, “During the third quarter we completed the migration of postpaid nTelos customers and as expected we saw higher customer churn in the quarter as we reached the end of the migration period. With the transition activities complete, we now turn our full focus on marketing our improved network, extended geographic coverage area and enhanced service offerings to attract new customers and grow our base of both prepaid and postpaid subscribers. We are excited about the opportunity to provide our comprehensive price plans and state-of-the art network to an expanding consumer base.”

Cable Segment

Service revenues in the Cable segment increased $2.0 million or 8.0% to $26.9 million, primarily due to growth in High Speed Data and Voice RGUs, video rate increases implemented in January 2017 to pass through programming cost increases, and new and existing customers selecting higher speed data packages. Operating expenses increased 4.7% or $1.2 million in the third quarter of 2017. Operating income was $3.6 million compared with $2.3 million in the prior year, primarily due to the continued transformation of our Cable segment from a video focus to broadband. In the third quarter the Company added 1,483 High Speed Data users and 327 voice users, and lost 869 video users.

Adjusted OIBDA in the Cable segment for third quarter 2017 was $10.0 million, up 21.1% from $8.2 million in the third quarter of 2016.

“We have established a robust network to address high consumer expectations for speed and reliability from their cable provider. Our network provides the high speed bandwidth and availability that our customers demand, providing an advantage in the competitive marketplace as we look to capture new customers and grow with our existing subscribers as they upgrade their service packages,” Mr. French stated.

Wireline Segment

Revenue in the Wireline segment increased 6.0% to $19.9 million in the third quarter of 2017, as compared to $18.7 million in the third quarter of 2016. Carrier access and fiber revenue for the third quarter of 2017 was $13.2 million, an increase of 6.9% from the same quarter last year, primarily as a result of new fiber contracts. Increases in broadband service revenue offset the loss of regulated voice service revenue. Operating expenses increased 5.9% or $0.8 million to $14.8 million for third quarter 2017, primarily due to costs to support new fiber contracts. Adjusted OIBDA in the Wireline segment for third quarter 2017 was $8.4 million, as compared to $7.7 million in third quarter 2016.

Other Information

Capital expenditures were $39.8 million in the third quarter of 2017 compared to $42.7 million in the comparable 2016 period. To date, the company has spent or committed $132.9 million of the estimated 2017 capital budget.

Cash and cash equivalents as of September 30, 2017 were $75.5 million, compared to $36.2 million at December 31, 2016. Total outstanding debt at September 30, 2017 totaled $833.0 million, net of unamortized loan costs, compared to $829.3 million as of December 31, 2016. At September 30, 2017, debt as a percent of total assets was 57.6%. The amount available to the Company through its revolver facility was $75.0 million.